Bill Gross Warns Bond Investors

Bill Gross Warning May Catch Bond Investors Off-Guard
Pacific Investment Management Co.’s Gross, manager of the world’s biggest bond fund, said yesterday in an interview with Tom Keene on Bloomberg Radio that “bonds have seen their best days.” Pimco, which announced in December that it would offer stock funds, is advising investors to buy the debt of countries such as Germany and Canada that have low deficits and higher- yielding corporate securities.
The prospect of a strengthening U.S. economy and rising interest rates makes an “argument to not own as many” bonds, Gross said in the interview.
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Treasuries have rallied for almost three decades, pushing the yield on the 10-year Treasury note from a high of 15.8 percent in September 1981 to 3.89 percent as of yesterday. The yield reached a record low of 2.03 percent in December 2008 during the height of the credit crunch.
Excess borrowing in nations including the U.S., U.K. and Japan will eventually lead to inflation as governments sell record amounts of debt to finance surging deficits, Gross said.
“People have been making money on fixed income for so long, people assume it’s going to continue when mathematically, it cannot,” said Eigen, whose fund is the third-best selling bond fund this year, according to Morningstar. “When people finally start to lose money in fixed-income, they won’t hesitate to pull money out very soon,” he said.
John Hancock Funds President and Chief Executive Officer Keith Hartstein said retail investors are already late in reversing their rush into bond funds, repeating the perennial mistake of looking to past performance to make current allocation decisions.
I agree bonds don’t look to be an appealing investment. They still may be a smart way to diversify your portfolio. I am investing some of my retirement plan in inflation adjusted bonds and continue to purchase them. My portfolio is already significantly under-weighted in bonds. I would not be buying them if it were not just to provide a small increasing of my bond holdings.
Related: Municipal Bonds, After Tax Return – 10 Stocks for Income Investors – Bond Yields Show Dramatic Increase in Investor Confidence – Investors Sell TIPS as They Foresee Tame Inflation

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On the heels of Jeff Gundlach's "there's going to be a buyer's remorse period" warnings yesterday, the other 'bond king' has raised similar fears that the Trump rally is overdone (as are the prospects for growth behind it).

NEW YORK: As bond yields plunge to record lows and investors look for income, they're pouring money into stocks, sending the market to its own record highs. Once upon a time, if you were an investor who wanted a steady stream of income, you would probably think of U.S. Treasury bonds. Backed by the solid credit of the U.S. government, those bonds were considered ultra-dependable forms of income that wouldn't lose value. You couldn't count on stocks to pay you a return like that.

NEW YORK: Greece's full-blown debt crisis and Puerto Rico's unfolding one have dominated headlines all week, but some of the biggest US investors have China at the top of their worry lists. Jeffrey Gundlach, Bill Gross, Dan Ivascyn, Mohamed El-Erian, and David Rosenberg are among the money managers keeping close watch of China where markets have been under severe selling pressure despite moves by regulators to restore confidence.

I had a nice conversation the other day with Lacy Hunt at Hoisington Investments. We agree on many aspects of the global economy and I have a few excerpts of Hoisington's latest forecast below.
First, let me state that if you are looking for someone who has called the US treasury market correct this past decade, look no further than Hunt.

Robert Hallberg submits:Interest rates are so obviously extreme in the opposite direction from the fundamentals and with record deficits, debts and unfunded liabilities, continued low interest rates will not be sustainable for much longer. Interest rates are already at 50 year lows and with a continued weakening dollar, there is only one direction for interest rates to go and that is up.